The benchmark Nikkei 225 stock index lost 375.90 points, or 2.24 percent, to finish at 16,438.47 points on the Tokyo Stock Exchange. The broader Topix index, which includes all shares on the exchange's first section, shed 28.25 points, or 1.77 percent, to 1,563.07 points.

During the morning session, the Nikkei index fell as much as 3.3 percent, but the market recouped some of its losses as the dollar recovered somewhat from its early slides.

"People oversold a bit early ... they will be watching U.S. housing data due out later this week for cues," said Terushige Shibata, trader at Mizuho Investors Securities Co.

In currencies, the U.S. dollar fell to as low as 113.27 yen early in the session, down from 114.80 yen late Friday in New York. The greenback was trading at 114.26 yen midafternoon. The euro rose to US$1.4328 from US$1.4296.

On Wall Street Friday, the Dow Jones industrial average dropped more than 360 points on the 20th anniversary of the Black Monday crash, as lackluster corporate earnings, renewed credit concerns and rising oil prices spooked investors.

The Dow fell 2.64 percent to 13,522.02. It was down for the fifth straight session and off 4.05 percent for the week.

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